Without prejudice rule: High Court emphasises narrow scope of exceptions

A recent High Court decision is of interest for its discussion of several of the recognised exceptions to the "without prejudice" (WP) protection which usually applies to settlement negotiations: Ocean on Land Technology (UK) Ltd v Land [2024] EWHC 396 (IPEC).

The decision highlights that: the burden is on the party seeking to establish that an exception to the WP rule applies; and establishing that an exception applies to some part of the WP negotiations will not necessarily mean that protection is lost for the whole of those negotiations.

The decision also emphasises the narrow scope of the exceptions to the WP rule, including the recognised exception where the rule is used to cloak “unambiguous impropriety”. It is well established that the exception will not be engaged merely because there is an inconsistency between statements made on an open and WP basis, even where that might lead to a risk of perjury. But the courts have generally shown themselves more willing to apply the exception where the WP material includes improper threats (see for example this blog post). The present decision is therefore of interest for the decision that the alleged threats went no further than would be expected in negotiations to settle a dispute, and therefore were not caught by the exception. The judgment does not, however, reveal the nature of the alleged threats, and so it is not entirely clear where the boundaries may be found to lie. It is therefore advisable to tread carefully, also bearing in mind solicitors’ professional duties.

The judgment also considers the much-criticised Muller exception, established in Muller v Linsley and Mortimer [1994] EWCA Civ 39, which applies where WP communications are relevant to whether a party has reasonably mitigated its loss in negotiating a settlement of separate proceedings, and the party has put the reasonableness of the settlement in issue. The court in the present case did not accept that Muller establishes a broader principle that a party waives WP protection whenever it puts in issue the terms of a settlement agreement. This is not surprising in light of previous Court of Appeal authority as to the narrow ambit of the exception (see this blog post).

Finally, the decision shows that, while there is an exception where WP material is relevant to establishing “factual matrix” for the interpretation of a contract, as established in Oceanbulk Shipping SA v TMT Ltd [2010] UKSC 44 (considered here), that exception will not be applied simply because the material is broadly relevant to the surrounding context.

For more detail see this post on our Litigation Notes blog.